Janet Yellen's appointment is a triumph for feminism and for progressives

Unlike her monetarist predecessors, the first female chair of the Federal Reserve puts tackling unemployment on an equal footing with fighting inflation.

There seems to be a consensus that this has been a good and bad year for feminism. Well sisters, listen up, because it’s time to celebrate.  According to a Radio 4 profile by Mary Anne Sieghart, a woman is now the first or second most powerful person in the world (depending on the relative power you attribute to Angela Merkel). And the Atlantic has described her as the most powerful woman in American history.  

How’s that for progress? Let’s all raise a glass in congratulations to Janet Yellen, the first female chair of the US Federal Reserve. We should be clear: this is a major break-through. No woman in history has ever chaired any of the world’s leading domestic financial institutions. The Bank of England, the European Central Bank, the Bundesbank, the Fed: all men, for all of history. When her term begins in February, against that backdrop, there will be Janet.

Whatever your economic standpoint about the role of central bankers in the microeconomic challenges we all face – paying for the shopping, affording next year’s holiday – surely it matters that there is one less hallowed, powerful, lofty position for which women are yet to be deemed qualified? So what might we expect from the Fed’s new chair?

Yellen hails from an economic tradition that sees the economist’s role as deeply connected to the concerns of ordinary individuals, having gained her PhD with James Tobin at Yale. As President Obama said yesterday, "The American people will have a fierce champion who understands that the ultimate goal of economic and financial policymaking is to improve the lives, jobs and standard of living of American workers and their families."

The current incumbent, Ben Bernanke, is a monetarist, building on the foundations of Milton Friedman and Anna Schwartz. They see the role of government in the economy being to appropriately control the money supply to provide price stability. Inflation is the target, no matter what the impact on individuals within the economy.   

In contrast, Yellen is certainly a progressive. She chaired Bill Clinton’s Council of Economic Advisers late in his term of office. Her critics from the left might argue that Wall Street’s apparent ease and, in some quarters, enthusiasm for Yellen’s appointment does not augur well for a tougher approach to regulation, though this probably stems as much from Yellen being a known actor already within the Fed, as opposed to a Fed outsider choice such as Larry Summers. But as we’ve seen with George Osborne’s approach to financial services regulation, and his defence of the bonus culture, the battle for a well-regulated global financial services industry is far from won.

As a highly distinguished labour market economist, Yellen authored work on the interplay between wage rates, unemployment, and what we might now term underemployment. Of course, this is now a major challenge in the US and European economies. At the Fed itself, she has been successful in placing unemployment on an equal footing with fighting inflation as a macro-economic target. And according to Time magazine, she’s a numbers person, setting high regard for evidence over orthodoxy. And when the orthodoxy has so conclusively failed, surely change is a good thing.  

Alison McGovern is Labour MP for Wirral South, shadow minister for international development, and studied economics at Birkbeck College

Janet Yellen testifies during her confirmation hearing November 14, 2013 on Capitol Hill in Washington, DC. Photograph: Getty Images.

Alison McGovern is Labour MP for Wirral South.

Getty Images.
Show Hide image

Why relations between Theresa May and Philip Hammond became tense so quickly

The political imperative of controlling immigration is clashing with the economic imperative of maintaining growth. 

There is no relationship in government more important than that between the prime minister and the chancellor. When Theresa May entered No.10, she chose Philip Hammond, a dependable technocrat and long-standing ally who she had known since Oxford University. 

But relations between the pair have proved far tenser than anticipated. On Wednesday, Hammond suggested that students could be excluded from the net migration target. "We are having conversations within government about the most appropriate way to record and address net migration," he told the Treasury select committee. The Chancellor, in common with many others, has long regarded the inclusion of students as an obstacle to growth. 

The following day Hammond was publicly rebuked by No.10. "Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included," a spokesman said (as I reported in advance, May believes that the public would see this move as "a fix"). 

This is not the only clash in May's first 100 days. Hammond was aggrieved by the Prime Minister's criticisms of loose monetary policy (which forced No.10 to state that it "respects the independence of the Bank of England") and is resisting tougher controls on foreign takeovers. The Chancellor has also struck a more sceptical tone on the UK's economic prospects. "It is clear to me that the British people did not vote on June 23 to become poorer," he declared in his conference speech, a signal that national prosperity must come before control of immigration. 

May and Hammond's relationship was never going to match the remarkable bond between David Cameron and George Osborne. But should relations worsen it risks becoming closer to that beween Gordon Brown and Alistair Darling. Like Hammond, Darling entered the Treasury as a calm technocrat and an ally of the PM. But the extraordinary circumstances of the financial crisis transformed him into a far more assertive figure.

In times of turmoil, there is an inevitable clash between political and economic priorities. As prime minister, Brown resisted talk of cuts for fear of the electoral consequences. But as chancellor, Darling was more concerned with the bottom line (backing a rise in VAT). By analogy, May is focused on the political imperative of controlling immigration, while Hammond is focused on the economic imperative of maintaining growth. If their relationship is to endure far tougher times they will soon need to find a middle way. 

George Eaton is political editor of the New Statesman.